HomeContributorsFundamental AnalysisDollar Steadies ahead of Fed Rate Decision; European Stocks Mostly Down

Dollar Steadies ahead of Fed Rate Decision; European Stocks Mostly Down

Here are the latest developments in global markets:

FOREX: The dollar remained flat near intraday lows, last trading around 113.30 versus the yen (-0.21%), as the Democrats Senate win in Alabama weakened Republicans’ majority, threatening the Trump administration’s future economic agenda. The pound climbed higher towards 1.3350 (+0.23%) after the UK employment data showed that in the three months to October, earnings excluding bonuses surprisingly inched up on a yearly basis, while the unemployment rate stood flat at a four-decade low. The euro was flat at 1.1733 against the dollar but weakened to 0.8788 versus the pound (-0.32%).

STOCKS: European indices were mostly on the back foot due to losses in the utilities and healthcare sectors, while investors were also cautious on the Fed policy meeting. The benchmark STOXX 600 inched down by 0.12% at 1200GMT, the German DAX 30 retreated by 0.18% and the French CAC 40 declined by 0.20%. The British FTSE 100 was steady.

COMMODITIES: Oil prices continued to gain after Tuesday’s API weekly report showed a bigger drop than anticipated in US crude inventories, while the shutdown of a major British crude pipeline provided further support. WTI crude jumped by 0.70% to $57.54 per barrel and Brent surged by 0.81% to $63.85. Gold fell by 0.25% to $1,240.30 per ounce.

Day ahead: Fed to deliver long-awaited rate hike; US CPI gathers attention

The dollar will be in the spotlight during the day as FOMC members conclude their last two-day policy meeting for 2017, while markets anticipate the US CPI figures to be released later in the European session.

The rate decision will be announced at 1900GMT, with forecasts indicating that interest rates will rise by 0.25 percentage points to 1.25-1.50%. As this is already priced in by the markets, the monetary policy statement (1900GMT) and Fed chair Janet Yellen’s last press conference (1930GMT) following the rate announcement will be of greater importance to investors. Particularly, investors will seek any clues on the path of the future stance on monetary policy and will be paying close attention to the central bank’s economic projections.

At 1330GMT, the US Bureau of Labour Statistics will release CPI figures for the month of November. According to forecasts, the index will likely gain 0.2 percentage points, growing by 2.2% y/y, while the core equivalent is anticipated to remain flat at 1.8% y/y. Even if the core measure is closer to the Fed’s inflation target of 2.0%, policymakers prefer to monitor the core PCE index which is still well below the Fed’s target for inflation.

In other upcoming events today, the US President will be talking about tax reforms at 2000GMT.

In oil markets, the EIA weekly report due at 1530 GMT is expected to indicate a smaller decrease in US crude oil stocks for the week ending December 8 relative to the preceding week – the decrease is estimated at 3.759 million barrels versus the previous week’s decline by 5.610m barrels (the biggest fall in two months). Gasoline and distillate inventories are expected to rise at a softer pace by 2.457 million and 0.902 million barrels respectively.

Markets will be also watching developments in the British Parliament today, where May’s government will try to repeal a legislation regarding Britain’s ties with the EU and make efforts to incorporate EU laws into domestic ones so as to ensure legal continuity after the official divorce day on March 29, 2019.

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